It has been 27 years since the Supreme Court issued its landmark decision in Buckley v. Valeo (1976) which upheld parts of the 1971 Federal Election Campaign Act and invalidated others. In that time, the high cost of financing political campaigns has been credited with deterring good people from seeking elective office and with forcing those who do run to accept large contributions from wealthy special interests, thereby granting disproportionate influence to those special interests and creating a public perception of corruption. This fall, the Court will revisit the issue of campaign finance in McConnell, et al. v. FEC, et al., in what may be its biggest decision on the subject in nearly 30 years.

The great dilemma of campaign finance reform has always been that the individuals who must pass legislation to reform the system are the very same people who most benefit from the existing system of finance. Thus, while virtually every member of Congress in the past decade has pledged to address the issue of money in politics, it took more than seven years of legislative battling before Congress passed, and President George W. Bush signed, the Bipartisan Campaign Reform Act (BCRA) in 2002. BCRA, which was sponsored in Congress by Senators McCain, Feingold, Snowe, Jeffords and Representatives Shays and Meehan, represented the most comprehensive effort to reform campaign finance practices since the original Federal Election Campaign Act of 1971 (FECA). Perhaps unsurprisingly, it has also given rise to some of the most significant campaign finance litigation since Buckley v. Valeo.

Within days of being signed into law, BCRA came under attack. More than 80 plaintiffs filed 11 different suits under a provision in the Act that provides for expedited review by a special three-judge court and direct review by the Supreme Court. On May 2, 2003, that special court issued an extraordinarily long and fractured decision. The three judges issued four opinions — a brief per curiam and separate opinions by each of the three participating judges — that consumed more than 1,600 pages. That decision upheld some parts of the legislation, struck down others and concluded that some were non-justiciable. At the request of parties on both sides of the case, the special court then stayed its own decision. The U.S. Supreme Court granted review, and is now set to hear four hours of oral argument on Sept. 8 of this year. How the Court decides this case will likely shape the debate over campaign finance for years to come.

Campaign Finance 101The issue of campaign finance reform — both in terms of what the reforms do, and what legal issues they raise — can seem complicated to those who have not spent years either studying the subject or hanging out at election law websites or conferences. To understand what is at stake in this case requires a short primer on election law beginning with FECA in 1971 and Buckley v. Valeo.

In 1971, Congress passed FECA, which established a comprehensive set of contribution and spending limits for federal elections. The law was challenged on the ground that it violated the First Amendment rights of those who wished to let their money do the talking, as well as on other constitutional grounds. With respect to the limits on contributions, the Supreme Court generally upheld those provisions against First Amendment claims. It found that limitations on contributions (as opposed to spending limits) were subject to something less than strict scrutiny, that corruption or the appearance of corruption was a sufficiently important government interest to justify such limits (as indeed was the interest in preventing the circumvention of those limits), and that so long as such limits were 'closely drawn' to serve such an interest, the laws would survive. It also upheld disclosure requirements with respect to independent campaign spending insofar as that spending involved 'express advocacy.'

But money is like water, and with enough time and ingenuity, political parties, politicians and other entities found ways to evade the limits established by FECA and upheld in Buckley. To understand how this happened, however, requires a brief foray into the terminology of campaign finance — namely, 'soft money' and 'hard money.' 'Soft money' is simply money that is not raised in compliance with the size and source restrictions under FECA — for example, from individuals who have exceeded FECA’s contribution limits, or from corporations or unions. While easy to raise, soft money also had relatively limited utility. It was never intended to be used in connection with federal elections, but rather to pay for non-federal elections or party infrastructure. By contrast, 'hard money' – that is, money that is raised in compliance with FECA’s limits — could be used to affect federal elections.

With time, however, both politicians and parties began to discover ways to use soft money to accomplish what could previously only be done with hard money. This evolution is clearest when considered in connection with the bread and butter of modern day campaigns: advertising. Under the pre-BCRA regime, soft money could not be used for 'express advocacy,' that is, ads that expressly advocate the election or defeat of a particular candidate. Thus, under the FECA regime, ads that said 'Vote for Joe' (or more likely 'Vote for me because I’m better than that corrupt thug baby-seal-clubber Joe') had to be paid for solely with hard money. However, the same ads, minus only the 'vote for' language (i.e., 'Joe clubs baby seals'), were considered 'issue ads' and could be paid for in part with soft money.

By collecting soft money and using it in ways it was never intended to be used, political parties, politicians, private individuals and organizations found ways to effectively circumvent FECA’s strictures on the size and source of contributions that could be used in federal elections. Notably, soft money, which, as noted above, was never supposed to be used to affect federal elections, was explicitly solicited, contributed and used to affect federal elections through sham issue ads and other activities that benefited candidates for federal office. Most commonly, soft money was funneled through the state parties to pay for so-called 'issue ads' that were intended to promote or attack federal candidates. Because those ads avoided express advocacy (e.g., 'vote for' or 'vote against'), political parties could use a mix of hard and soft money to pay for them. (Moreover, when the national parties funneled soft money through the state parties, they could use a greater proportion of soft money to finance those advertisements.)

The record before the special court reflects just how important soft money became in federal elections and the hydraulic pressure it exerted on the campaign finance system. For example, in a memo to a high-level executive at a Fortune 100 company, the company’s 'governmental affairs director' (i.e., lobbyist) explained this this way:

As the parties compete more vigorously for soft money dollars, the number and quality of events for interacting with both the leadership and rank and file Members has been greatly increased. Between the six main committees (DNC, DSCC, DCCC. RNC, NRCC, NRSC) there are events both in and out of [Washington, D.C.] almost every day of the week. . . . the parties have become increasingly reliant on soft money and both feel it is critical to their success in coming elections. Not surprisingly, this has made the parties especially sensitive to which companies contribute soft money, and which don’t. As noted, our traditional competitors continue to contribute large amounts of soft money and as [our company] expands its business into new areas . . . it faces new types of competitors . . . that also contribute heavily. Failure to maintain our soft money participation during this election cycle – given the heightened scrutiny those contributions will receive in the current competitive climate – may give our new and traditional competitors an advantage in Washington.

Another way of circumventing campaign finance restrictions was for the donors themselves to run sham issue ads. Specifically, corporations and unions that could not make hard money contributions deployed their treasury funds to buy ads that were intended to affect the outcome of federal candidate elections — something otherwise prohibited since the 1940s. Second, groups or individuals collected and spent unlimited amounts for such advertisements without having to publicly disclose the source, nature or amount of those expenditures. This explains the proliferation of groups with names like 'Citizens for Good Government' or 'The Society of Responsible Earthlings'–names that obscured the identities of their true financers.

How BCRA Changed the Campaign Finance LandscapeBCRA was enacted against this backdrop in March 2002. Put in its simplest terms, the purpose of BCRA was to prevent the circumvention of the existing campaign finance system – circumvention which took two principal forms: the use and abuse of soft money, and the explosion of sham issue ads. Title I of the Act thus deals with the solicitation, receipt and spending of soft money. It bars the national committees of the political parties, their personnel and entities they establish or control from soliciting soft money, receiving it, directing it to another person, transferring it or spending it. BCRA also requires state and local political parties to use hard money either in part or in whole to pay for four very specific categories of 'federal election activity': 1) voter registration activity during the 120 days immediately before a regularly scheduled federal election; 2) voter identification, get-out-the-vote activity and 'generic campaign activity' conducted in connection with an election in which a candidate for federal office is on the ballot; 3) public communications that promote, support, attack or oppose a clearly identified candidate for federal office; and 4) the services of state party employees who spend more than 25 percent of their time on activities in connection with a federal election. Moreover, the law also precludes federal officeholders and candidates from soliciting any funds that do not comply with the source and size restrictions of FECA.

The second part of BCRA (Title II) deals with sham issue ads. It extends source-of-funds limitations and disclosure rules to a new category of 'electioneering communications.' Per the statute’s primary definition,1 these 'electioneering communications' are advertisements that: (i) are broadcast on television or radio; (ii) air within 60 days before a federal general election or 30 days before a federal primary; (iii) refer to a clearly identified candidate for federal office; and (iv) are targeted to reach that candidate’s electorate.

The Lower Court LitigationAs one might expect, the effort to eliminate (potentially) billions of dollars in hidden contributions to political candidates managed to annoy virtually anyone who benefited from this system, including the parties, candidates and special interests. Soon after BCRA was enacted, 11 separate lawsuits with more than 80 plaintiffs were brought challenging the constitutionality of the Act. Those suits were consolidated in front of a special three-judge court, which included Judge Richard J. Leon, Judge Colleen Kollar-Kotelly and Judge Karen LeCraft Henderson. The plaintiffs included, inter alia, political parties such as the Republican National Committee and the California Democratic Party, politicians such as Sen. Mitch McConnell, such disparate organizations as the National Rifle Association, the American Civil Liberties Union, the AFL-CIO and even a group of minors contesting BCRA’s restrictions on contributions by children. The plaintiffs challenged BCRA on a number of constitutional bases, including the First Amendment (including freedom of the press), the Equal Protection clause, the Tenth Amendment (which reserves rights to the states that are not granted to the federal government) and 'general principles of federalism.' The plaintiffs challenged virtually every provision of the Act, sometimes from diametrically opposed positions. Some argued that certain restrictions were invalid because they were too rigid, others claimed the same restrictions were invalid because they were too lenient. The Act was defended not just by the Department of Justice and the Federal Election Commission ('FEC'), but also by the Act’s sponsors: Senators McCain, Feingold, Snowe and Jeffords, and Representatives Shays and Meehan, who intervened to defend the Act.

If the amount of paper produced per day is any measure of the intensity of legal battles, then the campaign finance litigation set new standards. Following expedited discovery, the parties conducted three rounds of intense concurrent briefing in less than a month. That process yielded nearly 2000 pages of briefs and roughly 1000 pages more of proposed findings of fact and conclusions of law — not to mention the voluminous record assembled by both sides. In May, the special three-judge court issued a 1,638 page decision, reputedly the largest in the D.C. District Court’s history.

While it is not uncommon for litigants to claim that they have difficulty following a court’s ruling, the BCRA litigation seems to have produced a decision that even its authors had difficulty navigating. In fact, the court’s decision was so convoluted that the judges felt the need to include a four-page schematic chart indicating each judge’s conclusions with respect to each provision challenged. The first opinion, a per curiam opinion by Judges Leon and Kollar-Kotelly, clocked in at over 170 pages. It set out the history of campaign finance legislation, described the provisions of the Act, made findings of fact related to the identity of the parties and the Act’s disclosure provisions, and reached certain conclusions of law relating to the freedom of the press claims asserted by one set of plaintiffs and most of BCRA’s disclosure provisions.

Judge Henderson then issued a separate 345 page opinion, in which she found more or less the entire statute unconstitutional. She concluded that there was no evidence that soft money 'corrupts' or creates the appearance of corruption. In addition, in an apparent swipe at the process, she noted in a footnote that: 'While both the district court and the circuit court have their strengths, the circuit court is more familiar with, and far better equipped to handle, the briefing-and-argument mode of judicial decision-making than is the trial court — as the excessive prolongation of these actions manifests.'

In contrast, Judge Leon’s opinion, which, in many instances was the controlling opinion, upheld the ban on the national parties’ use of soft money for ads attacking or promoting a candidate for federal election. His opinion also upheld the ban on state parties’ use of soft money for ads attacking or promoting a candidate for federal election, although it struck down provisions restricting state parties’ use of soft money for other federal election activities. Judge Leon concluded that when soft money is used for ads attacking or promoting a candidate, then there is a sufficient risk of corruption or the appearance thereof to justify BCRA’s restrictions. However, he concluded that when soft money goes to political parties and is spent on activities that, as he saw it, did not directly affect federal elections, there was no real risk of corruption or the appearance thereof under Buckley v. Valeo. Judge Leon also split the baby with respect to the ban on 'electioneering' advertising. He struck down the primary definition as overbroad because it regulated advertisements based in part on when and where they are broadcast, 'not their effect upon elections,' but he upheld the back-up definition, minus its final clause. The third member of the panel, Judge Kollar-Kotelly, issued a 706 page opinion, finding most of the statute constitutional, with certain exceptions.

The upshot of the 1,638 pages of decisions was that the Supreme Court inherited a fractured set of decisions, with no one single set of findings of fact on the principal issues in which any two judges joined. Nevertheless, while there was no single set of factual findings on the most important issues, Judges Kollar-Kotelly and Leon basically agreed that soft money donations were suspect because they bought access to elected federal officials, that soft money transfers by the national parties to state parties were primarily used for issue ads and that party leaders facilitate communications between soft money donors and lawmakers on policy matters. Nevertheless, as a result of the way the three judges’ ultimate positions as to the constitutionality of the various provisions combined, the results were mixed. With respect to soft money, the ban on national parties’ use of soft money to affect federal elections through communications that support or oppose federal candidates was upheld. But the ban on their use of soft money for non-federal or mixed purposes was struck down. Similarly, the restrictions on state parties’ use of soft money to affect federal elections through communications that support or oppose federal candidates were upheld, but restrictions on the use of soft money for other 'federal election activities' were struck down. The restrictions on the solicitation, receipt, transfer, spending or directing of soft money by federal officeholders and candidates in connection with any local, state or federal election were upheld, as was the prohibition on the use of soft money for public communications referring to a clearly identified candidate for federal office and that promote or attack a candidate for federal office. As for sham issue ads, while the primary definition was held unconstitutional, a modified version of the back-up definition was upheld (with the final clause struck as vague).

What’s Next?A few days (and, in one case, mere hours) after the three judge court issued its decision, jurisdictional statements began flowing in to the Supreme Court. The Supreme Court issued an order noting probable jurisdiction and setting the cases for oral argument in the early fall. In contrast to its usual practices, the Court set oral argument for four hours on Sept. 8, nearly a month before the First Monday in October. Both the amount of time allotted and the date are unusual: the typical case is accorded one hour for oral argument, and Sept. 8 is well before oral argument in the regular term is scheduled to begin. The solicitors general for three presidents are slated to argue: former Solicitor General Seth Waxman, on behalf of the Act’s sponsors, former Solicitor General Ken Starr, on behalf of the plaintiffs and current Solicitor General Ted Olson, on behalf of the government. Many hope that the Court will attempt to issue a decision quickly in order to resolve what rules will be in force for the 2004 presidential primaries and election. However, while no one knows what the Court will decide or precisely when it will decide it, any decision it reaches will likely set the terms for campaign finance reform for years to come.

Endnotes

1.The statute also included a second definition that would come into play only if the primary one were struck down.

ABOUT THE AUTHORSThe authors are litigators at Munger, Tolles & Olson in San Francisco. Bleich clerked for Chief Justice Rehnquist in 1990 and teaches constitutional law atBoalt Hall. Voigts clerked for Justice John Paul Stevens in 2000 and was partof the legal team representing the Congressional sponsors of the Bipartisan CampaignReform Act before the special three-judge court.